KGI Securities analyst Joel Ng has maintained an “outperform” rating on Uni-Asia while raising the target price to $1.66 from $1.56 after the company reported its highest ever net profit since its initial public offering (IPO) for the FY2021.
Despite the higher target price, Ng writes that it implies a “very conservative 0.67x FY2022 P/B, which is more than 30% discount to international peers who are trading over 1.0x P/B”.
“We maintain our multiple-based valuation for the shipping business at 0.8x FY2022 P/B and 0.6x FY2021 P/B for the Japan & HK property business,” adds Ng. “Despite the 100% rally of its shares over the past year, Uni-Asia’s valuations remain attractive amid the stronger-than-expected bulk carrier upcycle.”
On Feb 28, Uni-Asia reported an FY2021 net profit of US$18 million ($24,459) on the back of a decade-high charter rates for bulk carriers. “Balance sheet has strengthened significantly, with debt levels dropping to US$84 million as at end-December from US$114 million in the prior year period,” says Ng.
“As a result of the stellar results and stronger balance sheet, the group is proposing a final dividend of 3 cents and a special dividend of 2 cents, bringing the total year-end dividend to 5 cents,” he adds.
Uni-Asia’s net asset value (NAV) has also increased to US$1.69 as at end-December.
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To this end, Ng remains buoyant on Uni-Asia’s prospects as smaller vessels continue to be in hot demand.
“The Baltic Handysize Index (BHI) dropped by 50% from October 2021 to January 2022 but rebounded by more than 40% since the start of February 2022,” he says. “Even then, BHI at where it stands now is still at levels that are more than double the average rates seen over the past 10 years as demand for smaller vessels have continued to find support amid an already stretched global supply chain.”.
Additionally, eight of Uni-Asia’s wholly-owned dry bulks will renew in 2022, and another two in 1QFY2023. Unlike previous rounds of bull markets in the handysize dry bulk shipping market, this upcycle seems more robust given the better dynamics in the market.
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“In our last report dated Nov 22, 2021, we had expected Uni-Asia’s five HK commercial properties to begin contributing from 2HFY2022 onwards,” Ng says. “However, this will likely be delayed to 2023 given the current situation in HK.”
Meanwhile, Uni-Asia’s property assets under management (AUM) rose to JPY32.7 billion ($3.8 billion) as at end-4QFY2021, up from JPY30.4 billion as at end-2020. “Uni-Asia will continue to increase property assets under management in Japan to increase the asset management fee derived from this segment,” says Ng.
Some risks include a supply-demand imbalance in the dry bulk shipping sector that could lead to a drop in charter rates that will have the largest short-term impact on Uni-Asia’s earnings.
At 1.53pm, shares in Uni-Asia are trading at 2 cents lower or 1.77% down at $1.11.
